The Philippines has scope to ease monetary policy to protect growth, central bank Governor Amando Tetangco said, as authorities grapple with market swings that spurred declines in Asian stocks and currencies this week.
“We have scope to further ease,” Tetangco said today in an interview with Rishaad Salamat on Bloomberg Television. “The benign inflation outlook gives us room to further support growth if this proves to be needed. That said, we’re also mindful of financial-stability implications of keeping interest rates very low for an extended period of time.”
Bangko Sentral ng Pilipinas yesterday ended a series of cuts on its special deposit accounts, holding it at 2 percent while also keeping the benchmark overnight rate at a record-low 3.5 percent. Capital outflows from Southeast Asia have increased after Chairman Ben S. Bernanke said last month the Federal Reserve could consider reducing stimulus.
Investors pulled $2.1 billion from Asian stocks in the week to June 12, the most since August 2011, Citigroup Inc. analyst Markus Rosgen said in a report today. The Philippine Stock Exchange Index rose 3.1 percent at the noon break in Manila after sliding yesterday by the most since October 2008. The peso gained 0.6 percent to 42.85 per dollar after falling to a one-year low this week.
Bangko Sentral maintains “a strategic presence” in the foreign-exchange market, Tetangco said. It has employed macro-prudential measures and stepped up communication of its policy intent, he said, adding that there is space to “respond swiftly and appropriately” when needed.
“We don’t target any particular level of exchange rate,” Tetangco said. “What we hope we are able to accomplish is to create a relatively stable foreign-exchange environment where businesses can plan. And looking at the fundamentals, the peso remains supported by positive fundamentals.”
Bangko Sentral will study the impact of its previous measures on the financial markets and the economy before deciding on its next move, Tetangco said. Inflation held at a 13-month low of 2.6 percent in May.
The Philippines’ first investment-grade rankings from Fitch Ratings and Standard & Poor’s earlier this year had lured inflows, boosting the peso and prompting measures to avert asset-bubble risks. The central bank cut the rate on SDAs thrice this year, banned access for mutual funds and individually managed accounts, and relaxed curbs on dollar purchases.
Indonesia yesterday unexpectedly raised its benchmark rate for the first time since 2011, while South Korea held borrowing costs after a reduction in May. India will probably keep its repurchase rate at 7.25 percent on June 17, according to 14 of 23 economists surveyed by Bloomberg News.
The World Bank this week cut its 2013 global growth forecast and said the recovery “remains hesitant and uneven.” Philippine expansion last quarter was the fastest in Asia, with gross domestic product rising 7.8 percent from a year earlier, as President Benigno Aquino increased spending to a record.